IC Markets Europe Fundamental Forecast | 19 April 2023
What happened in the Asia session?
The AUD was not significantly impacted by the MI Leading Index m/m data release, which came in at 0.0% for the actual release, slightly higher than the 0.1% previous data.
Separately, Japan’s Revised Industrial Production m/m data showed a slight increase to 4.6% for the actual release, which was higher than the forecasted and previous data of 4.5%, indicating a positive growth in the Japanese economy.
What does it mean for the Europe & US Sessions?
The USD will likely triumph over the AUD and JPY on the mild data release from the respective countries. Likewise, pressure from the greenback should weigh on the GBP unless the upcoming CPI y/y release comes in higher than the expected 9.8%.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The upcoming release of the Beige Book can significantly impact the USD value. If the report indicates vigorous economic activity and growth, it may increase confidence in the dollar and its value. On the other hand, if the information suggests weakness in the economy, it may lead to a decrease.
Central Bank Notes:
- The US banking system is sound and resilient, but recent developments may result in tighter credit conditions for households and businesses.
- The Federal Reserve has raised the target range for the federal funds rate to 4-3/4 to 5 per cent, committed to returning inflation to its 2 per cent objective.
- In determining the extent of future increases in the target range, the Committee will consider various factors, including the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and economic and financial developments.
- Next meeting is on 3 May 2023
Next 24 Hours Bias
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
As gold is often considered a safe-haven asset and used as a hedge against inflation, the high level of inflation in the UK (forecast 9.8%, previous 10.4%) may continue to support long-term demand for gold as investors seek to protect their purchasing power.
Next 24 Hours Bias
Weak Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The MI Leading Index m/m for Australia, which showed a decline of 0.1% previously, may hurt the currency if the upcoming release continues to show a decline. The MI Leading Index is a composite index that provides an early indication of changes in the Australian economy. A decrease in this index suggests a potential slowdown in economic activity.
Central Bank Notes:
- Kept the cash rate unchanged at 3.60%
- Full impact of previous interest rate hikes is yet to be felt.
- Inflation in Australia has peaked, and the central forecast is to decline this year, at around 3% in mid-2025.
- Further tightening of monetary policy may be necessary to achieve the 2 – 3% inflation target
- Next meeting on 2 May 2023
Next 24 Hours Bias
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
There is no significant news event affecting the NZD today. The direction of the currency will depend on the upcoming release of the CPI q/q data. The forecasted figure is 1.5%, higher than the previous figure of 1.4%. If the actual data meets or exceeds the predicted figure, it may signal that the economy is performing well and lead to a bullish trend for the NZD.
Central Bank Notes:
- OCR increased by 50bps from 4.75% to 5.25%
- Recent severe weather events in the North Island have led to higher prices, increasing the risk of inflation expectations exceeding the target range.
- New Zealand’s economic growth is expected to slow through 2023 due to the slowing global economy, reduced residential building activity, and the ongoing effects of monetary policy tightening.
- Next meeting is on 25 May 2023
Next 24 Hours Bias
Mixed
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The forecasted and previous data indicate that Japan’s Revised Industrial Production m/m is expected to remain unchanged at 4.5%. However, significant deviations from the forecast may result in fluctuations in demand for the JPY. Positive data releases increase demand for the Yen, while negative data releases decrease demand.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2%
- Japan’s economy is expected to recover gradually
- The bank will not hesitate to take additional easing measures if necessary
- Next meeting is on 27 April 2023
Next 24 Hours Bias
Mixed
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The upcoming data releases for the Eurozone include a forecasted decrease in the current account from 17.1B to 10.3B, with both the Final CPI and Final Core CPI y/y expected to remain steady at 6.9% and 5.7%, respectively. These releases will impact the EUR depending on how much data differs from the forecasted figures. The German 10-y Bond Auction yield is anticipated to be 2.32% with a bid-to-cover ratio of 1.4.
Central Bank Notes:
- ECB raised interest rates by 50 basis points to ensure the 2% inflation target is met
- Inflation is projected to average 5.3% in 2023, with growth at 1%, and underlying price pressures remain strong
- The bank will continue to monitor market tensions closely and will be data-dependent in its policy rate decisions
- Next meeting on 4 May 2023
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Andrea Maechler, a member of the Swiss government’s governing board, is set to deliver a speech at the Fund Experts Forum in Switzerland. Her remarks will likely address whether Switzerland’s monetary policy is truly independent and the impact of any potential changes to the CHF’s value.
Central Bank Notes:
- Raised policy rate to 1.5% to counter inflationary pressure and ensure price stability. The SNB may need to raise the policy rate further in the future
- The SNB is providing liquidity assistance to Credit Suisse, and the crisis has been halted
- The new inflation forecast assumes a policy rate of 1.5% and puts average annual inflation at 2.6% for 2023 and 2.0% for 2024 and 2025.
- Mortgage and real estate market vulnerabilities persist
- Next meeting on 22 June 2023
Next 24 Hours Bias
Mixed
The Pound (GBP)
Key news events today
CPI y/y
What can we expect from GBP today?
The upcoming UK CPI y/y data release is expected to decrease from 10.4% to 9.8%. If the figure is lower than forecast, it could hurt the GBP as the BoE may adopt a less hawkish stance. Otherwise, a higher-than-expected figure would boost the GBP since the central bank will likely raise the interest rate to stamp out stubborn increases in consumer prices.
Central Bank Notes:
- The BoE’s MPC increased the Bank Rate by 25bps to 4.25%, with a majority of 7-2 in favour of the hike
- The UK banking system is judged to be robust and resilient.
- CPI inflation increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
- The MPC will continue to monitor inflationary pressures and adjust Bank Rate as necessary.
- Next meeting on 11 May 2023
Next 24 Hours Bias
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
The upcoming data release on Canadian Housing Starts, Industrial Product Price Index (IPPI), and Raw Materials Price Index (RMPI) are expected to impact the currency negatively. The forecasted figure for Housing Starts is 236K, compared to the previous figure of 244K, which could indicate slower economic growth. The predicted figure for IPPI is a decrease of 0.4%, compared to the last figure of -0.8%, while the forecasted figure for RMPI is a decrease of 0.7%, compared to the previous figure of -0.4%, indicating weaker economic activity.
Central Bank Notes:
- Bank of Canada holds its target for the overnight rate at 4.5%
- Labour markets remain tight with persistent price pressures, especially for services
- Economic growth in Q1 looks to be stronger than projected; to be weak through the remainder of this year before strengthening gradually next year
- Prepared to increase the policy rate further to return inflation to the 2% target.
- Next meeting on 7 June 2023
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The upcoming data release for Crude Oil Inventories is forecasted to show a decrease of 0.4 million barrels, compared to the previous data release, which reported an increase of 0.6 million barrels. This decrease could positively impact the oil price, indicating a higher demand for oil products.
Next 24 Hours Bias
Weak Bullish
